How does coordination of benefits work when an individual has multiple policies?

Coordination of benefits is a mechanism used to ensure that when an individual is covered by multiple health insurance policies, the claims process is managed effectively to prevent overpayment or duplication of benefits. The correct understanding is that this process allocates payment responsibilities among the different insurance carriers involved, ensuring that the total reimbursement for services does not exceed the actual cost incurred.

The primary goal of this coordination is to determine which insurance policy is considered the primary payer and which is the secondary payer. This helps to streamline the claims process and ensures that each insurer pays its fair share according to the terms of their policies. For instance, if both policies cover the same service, the primary insurer will pay first, and the secondary insurer may then cover some or all of the remaining costs, while adhering to any applicable limits outlined in the coordination of benefits rules.

This prevents scenarios where both insurers pay for the same expenses, which could lead to the insured receiving more money than what was spent on healthcare services. Thus, the essence of coordination of benefits lies in avoiding duplication and ensuring that the individual's total benefits from multiple insurers are properly calculated and distributed.